Huron Company produces a commercial cleaning compound known as Zoom. The direct

Question

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below Quantity or Standard Price Standard Bours 7.40 pounds $2.60 per pound $19.24 0.45 hour .00 per hour $3.60 Direat During the most recent month, the following activity was recorded a. 12,100.00 pounds of material were purchased at a cost of $2.50 per pound. b. All of the material purchased was used to produce 1,500 units of Zoom c. 575 hours of direct labor time were recorded at a total labor cost of $5,750 1. Compute the materials price and quantity variances for the month 2. Compute the labor rate and efficiency variances for the month. (For all requirements, Indicate the effect of each variance by selecting "F for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance). Input all amounts as positive values. Round your intermediate calculations to the nearest whole dollar.)

Explanation / Answer

1) Material Price Variance $    1,210 F Material Quantity Variance $    2,600 U Working: Material Price Variance = (Standard Price - Actual Price)*Actual Quantity of materials used = (2.60-2.50)*12100 = $         1,210 F Material Quantity Variance = (Standard Quantity-Actual Quantity)*Standard Price = (11100-12100)*2.60 = $         2,600 U Standard Quantity = Actual Production x Standard quantity per unit = 1500 x 7.4 =           11,100 2) Labor rate variance $    1,150 U Labor efficiency Variance $        800 F Working: Labor rate variance = (Standard rate - Actual Rate )*Actual Labor hours = (8.00-10.00)*575 = $         1,150 U Actual Labor rate = Actual Labor cost/actual labor hours = $         5,750 / 575 = $         10.00 Labor efficiency Variance = (Standard Labor hours-Actual Labor hours)*Standar Labor rate = (675-575)*8.00 = $            800 F Standard Labor hours = Actual productions x Standard Labor hours per unit = 1500 x 0.45 = 675

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